US risk managers back the creation of state-backed pandemic insurance scheme

US-based risk management society Rims has thrown its weight behind the effort to create a state-backed pandemic risk insurance programme, after a survey of members found that 91% of risk professionals support the concept. The society issued a letter to the US Department of the Treasury, Congress and the office of President Donald Trump requesting the creation of the programme to “accelerate” economic recovery and ensure that the economy is far better prepared for any future pandemic. Rims said that a pandemic risk insurance programme would provide greater access to capital from lenders and establish a viable insurance market with sufficient, affordable capacity as insurers in the US and worldwide move swiftly to firm up exclusions for pandemic risk within existing coverages such as business interruption (BI) policies. The society has also called on the risk management community to support the initiative by contacting their local Congress member via a form that it has provided. Before sending the letter, Rims carried out a survey of US risk managers to find out their views on the proposed federal pandemic insurance backstop. Key findings from survey included: 67% of risk professionals expect direct BI losses caused by Covid-19 77% expect the losses to be more than $1m – included in that group were 36% who estimate losses to be more than $25m 91% are supportive of a Terrorism Risk Insurance Act-style federal loss-sharing programme for insurance claims relating to losses resulting from a pandemic or epidemic 65% of risk professionals would be willing to pay up to 5% more in premium. “From our homes and our local communities to the boardrooms of some of the world’s largest corporations, Covid-19 has highlighted the need for strong risk management strategies to address interruptions resulting from a global pandemic,” said Rims president Laura Langone. “Congress has done exceptional work by quickly introducing the CARES Act but there is still much work to be done. We look forward to the opportunity of collaborating with them to develop a sound pandemic programme that instils confidence in businesses and reinvigorates the economy.” In the letter sent to Congress, Rims said: “The hardest-hit industries, which are vital to the US economy, fear that they will not be able to access capital without assurance against pandemic risks or that coverage is cost-prohibitive to a broad group of consumers. It is our mission to help these businesses and their employees mitigate that risk. A pandemic risk insurance programme would operate as a risk-sharing mechanism between the insurance industry, policyholders and the Federal government.” It added: “As with traditional insurance policies, policyholders would absorb initial losses up to a specified deductible. Insurers would then provide affordable business interruption coverage up to a certain limit, with the government backstopping the programme after that limit is exhausted. We strongly believe that mitigating the initial financial shock of a pandemic will reduce the compounding effects of uncertainty on the economy. A pandemic risk insurance programme will help rebuild confidence and security for our businesses, which is a critical first step to recovery.”

US risk managers back the creation of state-backed pandemic insurance scheme

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